Tennessee Consolidated seeks core managers

The $38.2 billion pension system is on the hunt for firms to manage and grow its $1.8 billion low-risk real estate portfolio.

The Tennessee Consolidated Retirement System (TCRS) has begun its search for core investment managers to manage and grow a $1.8 billion portfolio of low-risk equity real estate. 

The $38.2 billion pension system intends to sign contracts with up to eight investment firms, each managing a non-discretionary separate account. TCRS will allocate existing assets to each of the managers on a transactional basis, though firms will be constrained to 40 percent of the total real estate target for risk management purposes, according to its request for proposals (RFP).

In terms of growth, TCRS, which currently invests approximately five percent in real estate, has a target allocation of seven percent to the asset class. The pension plan intends to invest 80 percent of this increased allocation in core properties, allowing up to 20 percent to be utilized “more opportunistically in search of higher risk/return investments.”  

With regard to new investments, TCRS is seeking firms to “acquire, manage and dispose of low-risk, unleveraged and substantially leased office, retail, industrial and multifamily investments, as well as non-traditional properties such as student housing,” according to pension documents. Though TCRS prefers to make direct investments, properties may be acquired through co-investments with comparable institutional investors or comparable strategy commingled funds.

The RFP, prepared by The Townsend Group, outlines minimum manager qualifications, including registration with the Securities and Exchange Commission, 10 years of institutional real estate experience for senior team members, $1 billion in private real estate investments under management and willingness to manage the account with TCRS’ investment discretion.

Proposals are due by September 1. After Townsend identifies finalists and TCRS staff reviews the recommendations, the final selection period will take place between October 15 and November 1.